It seems that more Americans are wising up to the Congressional schemes to indefinitely lavish the country’s wealthiest corporations and individuals with hundreds of billions of dollars in tax cuts while giving some middle-class families a few morsels of tax relief for a limited time.
As mentioned in a previous CCLP blog, the plans would eliminate deductions that benefit low- and middle class families, force dramatic cuts in programs including Social Security, Medicaid and Medicare while needlessly raising the national debt by a whopping $1.5 trillion. Meanwhile, the Senate one-upped the House’s already horrible plan by adding a repeal of the Affordable Care Act’s requirement for individuals to obtain health insurance. If passed, the repeal would further destabilize the health insurance market, result in even higher premiums and leave tens of millions of Americans without coverage. As Sen. Susan Collins recently noted, the premium hikes alone will likely wipe out (or more than wipe out) any dividends from the Senate bill for most middle-class people.
Unfortunately, many Americans are struggling so much that a couple hundred dollars in tax relief for a few years sounds tempting, and that enticement factor has played well with some constituents. But in the aggregate, both proposals generously reward the richest taxpayers at the considerable expense of the poorest in the short-term, and even more so in the long-term.
As American families prepare to argue about politics and policy over Thanksgiving dinner, here are five more reasons to oppose the tax-reform proposals in their current form:
1) Despite promises that the tax relief will “trickle down” to working people, none of the tax cuts for corporations are contingent on job creation, hiring, employee training or increasing employees’ wages. It seems that many members of Congress actually believe in the fabled “trickle-down” theory that economic stimulus for the rich will benefit those in lower income brackets over time. Unfortunately, history has disproven this theory as shown by the effect of previous plans to restructure the tax code. While corporations are rewarded greatly in the latest tax-reform proposals, there are absolutely no incentives for them to invest in jobs and workers.
2) The proposals would limit the ability for middle- to low-income individuals to advance their education. For example, the Lifetime Learning Credit for individuals, a refundable tax credit of up to $2000 for tuition and supplies would be eliminated under the House version of the tax plan. Graduate student tuition waivers would count as taxable income under the House bill, and the House would eliminate the provision in employer-based tuition programs — which would count as taxable income to employees. Eliminating these credits and waivers creates a huge disincentive for most people to advance their education and career opportunities that could potentially improve their financial well-being later on.
3) Low-income single parents and people with more than two kids are likely to pay MORE taxes, not less under the plans. Both plans propose a change of filing status that would raise the bottom tax rate from 10 percent to 12 percent. They also eliminate the $4,000 per person exemption (applied to children and dependents) in favor of a temporary $300 dependent “credit.” Meanwhile, parents who pay alimony will no longer be allowed to deduct their payments on their taxes nor take advantage of child tax exemptions — likely raising their taxable income (and their taxes) when those payments exceed the newly bolstered standard deduction of $12,000 a year.
4) The House version of the tax bill eliminates the medical expense deduction, potentially forcing those with serious medical injuries into the Medicaid program or even medical bankruptcy. This deduction applies to people whose medical expenses are more than 10 percent of their adjusted gross income. More than 8.8 million people claim this deduction, with most earning $75,000 or less with a household member aged 65 or older. This deduction helps people with high medical costs, including seniors in nursing homes, people with chronic health conditions and parents with disabled children.
5) The plans would be especially hard on older Americans. For example, repealing the individual mandate, as mentioned earlier, would raise premiums by about $1,000 a year for older people, according to the Congressional Budget Office. It’s estimated the plans will result in $25 billion in Medicare cuts that would go into effect within 15 days at the end of the session to reduce spending in the 2018 fiscal year. Not to mention, the aforementioned elimination of the medical-expense deduction would also mean that assisted-living expenses and other long-term care would not be tax deductible.
University of California, Berkeley professor and former Secretary of Labor Robert Reich recently opined that if passed, the proposals would represent the largest transfer of concentrated wealth in American history. Let’s make sure these proposals don’t work their way in the tax code.
Contact your elected representatives and tell them that you favor tax reform that puts opportunity and economic stimulus for working people ahead of moneyed interests.
– By Bob Mook